Martin Lewis is telling 5.4 million people to stop paying their student loans. Not forever. Not yet. But right now, for a specific group of high earners, the BBC’s chief money advice guru says that overpaying on a Plan 2 loan is financially irrational. He calls it “throwing money away.” The warning drops like a chill in a room full of people who thought they were doing the right thing by paying off debt fast.
The issue isn’t the debt itself. It’s the structure. For the millions who borrowed between 2012 and 2023, the interest rate is tied to inflation, or CPI, plus a premium based on income. That sounds standard.
Except when the interest rate exceeds the growth of your salary, the debt doesn’t shrink. It grows. Lewis told a London data consultant named Callum, earning £99,000, that he had a “conundrum.” He wanted to know if he should slash his mortgage or clear his student loan. Lewis said the answer depends massively on your earnings level.
Because that, not the amount you borrowed, dictates what you pay each year. Five million people hold these loans. That is a staggering number. It represents roughly three-quarters of all outstanding student debt in the country. The Money Saving Expert website has long labeled Plan 2 a “stealth tax” because the interest rates are designed to be higher than the inflation rate for most borrowers.
The “Stealth Tax” That Never Ends
The result is a debt balance that increases year on year for many, despite payments. It’s a trap that feels invisible until you look at the total owed.
Lewis noted that these loans are wiped out after 30 years. This is the critical mechanism that changes the math. If you earn under £29,385, you pay nothing. If you earn above that, you pay 9% of the excess.
But if you are a high earner, you hit the higher interest threshold. That’s where the problem starts. The interest rate climbs to CPI plus 5%. For most people, their income doesn’t rise by 5% every single year.
But their debt does. It’s a quiet bleed. And it’s hard to see when you’re just making a monthly deduction from your pay.
Why Overpaying Is a Financial Blunder
Callum asked if he should prioritize the student loan. Lewis said no. He said “it depends” but the conclusion was clear for high earners. About 70% of Plan 2 borrowers will not repay their loans in full within the 30-year window.
The debt is written off. If you pay extra, you are paying down a balance that might vanish anyway. That’s a harder sell than it sounds when you’re watching your money leave your bank account. You want to be debt-free.
It feels good. But if the system is designed to forgive the debt eventually, your extra payments are just a gift to the government.
Lewis called this a “plausible risk.” He said that overpaying might not reduce what you pay in the future. In fact, it could increase your total outgoings compared to letting the payment run its course. The logic is counter-intuitive. Most people think paying off debt is always good.
But with income-based repayment, paying off principal doesn’t lower your monthly outgoings. Your outgoings are tied to your salary, not your balance. So you pay the same 9% every month until you retire or die, whichever comes first. And your balance might still be there.
It’s a strange financial reality that few people understand. And it’s why the “snowball method” of debt repayment fails here.
You might wonder why the government hasn’t changed this. The answer is political. Student loans are a massive fiscal tool. Freezing the threshold means more people become liable.
It’s not charity. It’s revenue. The Department for Education confirmed on Thursday that the Plan 2 threshold remains at £29,385 from 6 April 2027 to 5 April 2028. The higher interest rate threshold stays at £52,885.
That freeze is significant. Inflation raises salaries, which pushes more people over the line. So the pool of payers grows. And the debt grows with them.
It’s a self-reinforcing cycle that benefits the state at the expense of the borrower. This isn’t just a UK problem. It mirrors the student loan crisis in India, where the burden of higher education has shifted dramatically to families. In India, student loans are often unsecured and linked to personal credit, meaning default can ruin a credit score for a decade. The Indian government’s Central Sector Scheme of Interest Subsidy covers 9% or the applicable rate, but only for the duration of the course plus a moratorium period.
What This Means for India
After that, the full burden falls on the borrower. The difference is that UK loans are tied to income, which offers a safety net. In India, there is no such automatic adjustment. If you lose your job, the debt remains.
And the EMI remains. It’s a risk that Indian graduates taking postgraduate degrees abroad are increasingly facing, especially with the rupee’s weakness against the pound and dollar.
For Indian professionals living in the UK, this is a direct financial warning. If you’re working in London, Singapore, or Dubai, and you have a UK student loan, you need to check your repayment status. The 30-year wipeout applies regardless of where you live, as long as you report your income to the Student Loan Company. Many Indian expats fail to do this, leading to back-payments and penalties.
The lesson from Lewis’s advice is universal: understand the mechanics before you pay. Don’t assume that paying off a loan is always the best move. Sometimes, the structure is against you. And in that case, you’re just throwing money away.
That’s a lesson that applies from Whitehall to Whitefield Road. The Department for Education’s decision to freeze the threshold is a slick move. It looks neutral. It isn’t. By keeping the threshold at £29,385 while inflation pushes salaries higher, the government is silently widening the net.
The Threshold Freeze: A Hidden Cut
More people will now owe repayments. This is a tax increase without the political heat of a tax bill. It’s done quietly, in the fine print of a statutory instrument. The higher interest threshold at £52,885 also stays frozen.
That means more high earners will face the punitive interest rates. It’s a double whammy for those in the middle and upper-middle income brackets. They pay more, and their debt grows faster.
Lewis has been critical of this structure for years. He calls it “illogical” and “unfair.” The UK government defends it as a way to make sure that those who can afford to pay do so. But the definition of “afford” is shifting. As living costs rise, a salary that was comfortable five years ago is no longer enough.
Yet the repayment obligation goes up. It’s a mismatch that is getting worse, not better. And there’s no sign of it changing anytime soon. The next review is scheduled for 2028.
Until then, the status quo holds. And the debt keeps climbing.
What Happens Next for Borrowers
The next key date is 6 April 2027. That’s when the new repayment year begins. The threshold will remain frozen, but salaries will likely have risen. More people will cross the line.
The Student Loan Company will send out letters asking for income details. If you don’t respond, they will use HMRC data to make a payment. This is often inaccurate. It can lead to overpayment or underpayment.
You have to check. You have to be active. Passive is dangerous. The system is designed to assume you know what you’re doing.
You don’t. And that’s where the money leaks away.
For high earners like Callum, the advice is clear. Prioritize your mortgage. It has a fixed end date. Your student loan doesn’t.
If you lose your job, your mortgage doesn’t disappear. Your student loan payment does. That’s a key difference. The mortgage is a tangible asset.
The loan is a liability with a weird, time-based forgiveness clause. Lewis said it’s “really important” to understand this. He said that for most people, overpaying is a mistake. It’s not a strategy.
It’s a habit. And habits can be costly. The best thing you can do is do nothing. Let the system run.
Let the 30 years tick by. And keep your money for things that actually matter. Like your house. Or your retirement.
Or just surviving the next decade without burning a hole in your wallet. Lewis didn’t say stop paying. He said don’t overpay. For Plan 2 borrowers, the 30-year wipeout means many won’t repay the full amount. If you overpay, you might be paying down a debt that will be forgiven anyway.
Frequently Asked Questions
Why did Martin Lewis say to stop paying student loans?
That’s the “throwing money away” part. It’s a specific warning for high earners.
Who is affected by the Plan 2 student loan warning?
About 5.4 million people in the UK took out loans between 2012 and 2023. These are Plan 2 loans. If you’re a high earner, especially over £52,885, you’re at risk of paying more in interest than you save in principal reduction. Check your income and repayment rate.
How does the student loan threshold freeze affect repayment?
The threshold stays at £29,385. As inflation raises salaries, more people will earn above this amount. That means more people will start paying, or pay more. It’s a hidden increase in income tax, effectively. The freeze benefits the government, not the borrower.
Can I write off my student loan earlier?
No. The write-off happens automatically after 30 years of repayment (or 30 years after you were due to start, if you never started). You can’t force an early write-off. You can only stop paying if your income drops below the threshold. There’s no early exit strategy for high earners.
Source: Daily Mirror UK
Source: Daily Mirror UK
